Correlation Between Tesla and BorgWarner

Can any of the company-specific risk be diversified away by investing in both Tesla and BorgWarner at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Tesla and BorgWarner into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tesla Inc and BorgWarner, you can compare the effects of market volatilities on Tesla and BorgWarner and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Tesla with a short position of BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and BorgWarner.

Diversification Opportunities for Tesla and BorgWarner

0.87

Correlation Coefficient

Tesla  BorgWarner

Very poor diversification

The 3 months correlation between Tesla and BorgWarner is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Tesla is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Tesla Inc are associated (or correlated) with BorgWarner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BorgWarner has no effect on the direction of Tesla i.e., Tesla and BorgWarner go up and down completely randomly.

Pair Corralation between Tesla and BorgWarner

Given the investment horizon of 90 days Tesla Inc is expected to under-perform the BorgWarner. In addition to that, Tesla is 2.44 times more volatile than BorgWarner. It trades about -0.13 of its total potential returns per unit of risk. BorgWarner is currently generating about -0.09 per unit of volatility. If you would invest  3,152  in BorgWarner on December 29, 2024 and sell it today you would lose (333.00) from holding BorgWarner or give up 10.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Tesla Inc  vs.  BorgWarner

Tesla Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BorgWarner

Risk-Adjusted Performance

Very Weak

Over the last 90 days BorgWarner has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tesla and BorgWarner

The main advantage of trading using opposite Tesla and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, BorgWarner can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BorgWarner will offset losses from the drop in BorgWarner's long position.

The idea behind Tesla Inc and BorgWarner pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.